REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #2

ALEXANDER, JOHNSON, MASSAC, PULASKI, AND UNION COUNTIES

FINANCIAL AUDIT

(In Accordance with the
Single Audit Act and OMB Circular A-133)

For the Year Ended:

June 30, 2004

Summary of Findings:

Total this audit                          4

Total last audit                          0

Repeated from last audit           0

Release Date:

May 19, 2005

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

To obtain a copy of the Report contact:

Office of the Auditor General

Iles Park Plaza

740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

This Report Digest is also available on

the worldwide web at

http://www.state.il.us/auditor

SYNOPSIS

·        The Regional Office of Education #2 has not implemented an adequate system to track capital asset additions and deletions or their related depreciation. 

·        The Regional Office of Education #2 did not follow its established internal control procedures regarding the bank reconciliation process.

·        The Regional Office of Education #2’s funds deposited at a financial institution exceeded the amount pledged as collateral by approximately $134,636.

·        The Regional Office of Education #2 did not publish or post required information about its Institute Fund.

        {Expenditures and Revenues are summarized on the reverse page.}

FY 2004

FY 2003

TOTAL REVENUES

$3,668,476

$4,118,708

Local Sources

$170,767

$55,071

% of Total Revenues

4.65%

1.34%

State Sources

$1,430,520

$1,856,938

% of Total Revenues

38.99%

45.09%

Federal Sources

$2,067,189

$2,206,699

% of Total Revenues

56.35%

53.58%

TOTAL EXPENDITURES

$3,793,608

$4,187,999

Salaries and Benefits

$2,043,695

$2,169,553

% of Total Expenditures

53.87%

51.80%

Purchased Services

$1,378,359

$1,224,346

% of Total Expenditures

36.33%

29.23%

All Other Expenditures

$371,554

$794,100

% of Total Expenditures

9.79%

18.96%

TOTAL NET ASSETS¹

$1,862,488

$1,963,740

INVESTMENT IN CAPITAL ASSETS¹

$849,530

$938,443

1         In fiscal year 2004, Regional Offices of Education implemented Government Accounting Standards Board (GASB) Statement No. 34 which established a new financial reporting model for state and local governments.  Government-wide financial statements are prepared using full accrual accounting that reports Total Net Assets.   

              Percentages may not add due to rounding.

REGIONAL SUPERINTENDENT 

During Audit Period:  Honorable Dan Anderson

Currently:  Honorable Dan Anderson

The Regional Office of Education #2 has not implemented an adequate system to track capital asset additions and deletions or their related depreciation. 

The Regional Office of Education  #2 did not follow its established internal control procedures regarding the bank reconciliation process.

The Regional Office of Education #2’s funds deposited at a financial institution exceeded the amount pledged as collateral.

The Regional Office of Education #2 did not publish or post required information about its Institute Fund.

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

LACK OF ADEQUATE CAPITAL ASSET SYSTEM

        The Regional Office of Education #2 has not implemented an adequate system to track capital asset additions and deletions or their related depreciation.  When assets are disposed of, the assets are not being properly removed from the capital asset schedule.  The assets remain on the schedule with an adjustment at the bottom of the schedule to subtract the cost of the deletions.  Also, the spreadsheet does not include the estimated useful life and method of depreciation of the capital asset and, as a result, does not calculate and track depreciation associated with the Regional Office’s capital assets.

        The Regional Office of Education Accounting Manual requires each ROE to maintain detailed capital asset records for both accounting purposes as well as insurance purposes, for capital assets costing $500 or more.  The ROE Accounting Manual also states that the capital asset inventory records should include among other things: estimated useful life and method of depreciation; estimated salvage value; and date, method, and authorization of disposition. (Finding 04-1, page 12a) 

        The Regional Office of Education #2 agreed with recommendation to modify its current capital assets spreadsheet to properly track all existing assets, additions, disposals, and transfers.  The spreadsheet will also be adapted to calculate deprecation expense on a basis that conforms to generally accepted accounting principles.

NONCOMPLIANCE WITH ESTABLISHED INTERNAL CONTROL PROCEDURES

        The Regional Office of Education #2 did not follow their established internal control procedures regarding the bank reconciliation process.  As of September 13, 2004, the Regional Office of Education #2’s June 30, 2004 bank statement for its main operating account had not been reconciled.  (Finding 04-2, page 12b)

        The Regional Office of Education #2 accepted the recommendation to follow their internal control procedures to ensure timely reconciliation and review of all bank statements.

INADEQUATE PLEDGED COLLATERAL

        The Regional Office of Education #2’s amount of funds deposited at a financial institution exceeded the amount pledged as collateral by approximately $134,636.  The Regional Office failed to monitor the bank balance against the amount of collateral pledged by the bank. 

        The Public Funds Deposit Act (30 ILCS 225/1) gives the authorization for deposits in excess of the federally insured limit to be covered by pledged collateral held by the financial institution. (Finding 04-3, page 12c)

         The Regional Office of Education #2 agreed with the recommendation to increase the amount of collateral pledged by the financial institution to cover all deposits.  In addition, the Regional Office will work with its financial institution to monitor the amount of pledged collateral held to ensure that sufficient collateral is being maintained.

CONTROLS OVER COMPLIANCE WITH LAWS AND REGULATIONS

           The Illinois School Code (105 ILCS 5/3-12) requires that on or before January 1 of each year, the Regional Superintendent shall publish in a newspaper of general circulation published in the region or post in each school building under his/her jurisdiction, certain information regarding the Office’s Institute Fund.  According to the Regional Office, while the publication/posting requirement was complied with in prior years, it was not done in 2003 due to an oversight. (Finding 04-4, page 12d)

       The Regional Office of Education #2 accepted the recommendation to comply with the statutory requirement.

AUDITORS’ OPINION

      Our auditors state the Regional Office of Education #2’s financial statements as of June 30, 2004 are fairly presented in all material respects except for the effect of the fixed assets being reported at cost in the government-wide financial statements.  Fixed assets should be depreciated over their estimated useful lives and reported at cost, net of depreciation in the government-wide financial statements in order to conform with accounting principles generally accepted in the United States of America.  

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:KJM:ro

SPECIAL ASSISTANT AUDITORS

        Our special assistant auditors were Kemper CPA Group, LLP.